The number of initial jobless claims was 497,000 in the week ended September 27, the highest since 517,000 in the week ended September 29, 2001 and above Wall Street economists' forecasts of 475,000. Economists said the report showed the economy was being rattled by forces other than the hurricanes, adding that the numbers were at high levels even when the impact of the storms was filtered out.

WASHINGTON
(Reuters) - The number of U.S. workers filing new claims for jobless
benefits rose to their highest in seven years due to the impact of
hurricanes Ike and Gustav, the government said in a report on Thursday.

The number of initial jobless claims was 497,000 in the week ended
September 27, the highest since 517,000 in the week ended September 29,
2001 and above Wall Street economists' forecasts of 475,000.

"It is estimated that the effects of Hurricane Gustav in Louisiana
and the effects of Hurricane Ike in Texas added approximately 45,000
claims to the total," the Labor Department said in its weekly report.

Economists said the report showed the economy was being rattled by
forces other than the hurricanes, adding that the numbers were at high
levels even when the impact of the storms was filtered out.

"The underlying claims reflect an upward trend in unemployment,"
said Dana Saporta, economist at Dresdner Kleinwort Securities LLC in
New York.

"The unemployment rate may settle back to 6 percent temporarily due
to the teenagers going back to school from their summer job search,"
Saporta said.

But "our view is the unemployment rate will peak about 6.7 percent next year," Saporta said.

Steve Goldman, market strategist at Weeden and Co. in Greenwich,
Connecticut, agreed "the economic picture is going to get worse," but
the stock market's 9-percent drop last month showed investors already
know that.

The four-week average of new jobless claims, a better gauge of
underlying labor trends because it irons out week-to-week volatility,
rose to 474,000 to 462,500 the week before.

That was also the highest reading in seven years, or since October 27, 2001, when it was 480,750, the department said.

The measure has mounted steadily as the U.S. housing slump and
resulting strain in the financial services industry has chilled growth
and crimped hiring.

The number of people remaining on the benefit rolls after drawing an
initial week of aid increased 48,000 to 3.591 million, the highest
since the week ended September 6 2003.

Analysts had estimated so-called continued claims to be 3.55
million. It was the 23rd straight week that claims were above 3
million, in another sign that the slowing economy is making it harder
for U.S. workers to find jobs.

(Reporting by Doug Palmer in Washington and Richard Leong and Steven C. Johnson in New York, Editing by Chizu Nomiyama)